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Category: Stock Market and Kellogg's
Date: 29 October 2019 Stock Price: $63.84 We take a look at the 3rd quarter earnings report of their 2019 fiscal year of Kellogg's, a company that owns brands such as Pringles, Rice Krispies and Pop-Tarts with quarterly sales totalling almost $3.4 billion.
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About Kellogg's
At Kellogg Company (NYSE: K), we strive to enrich and delight the world through foods and brands that matter. Our beloved brands include Pringles®, Cheez-It®, Special K®, Kellogg's Frosted Flakes®, Pop-Tarts®, Kellogg's Corn Flakes®, Rice Krispies®, Eggo®, Mini-Wheats®, Kashi®, RXBAR®, MorningStar Farms® and more. Net sales in 2018 were approximately $13.5 billion, comprised principally of snacks and convenience foods like cereal and frozen foods. Kellogg brands are beloved in markets around the world.
Overview of Kellogg's 3rd quarter 2019 earnings report
Data below refers to quarterly data unless specified otherwise:
- Net sales: $3.372 billion (down from $3.469 billion for the same period of the previous year)
- Net sales increased by -2.79% over the last 12 months
- Cost of sales: $2.372 billion (up from $2.293 billion for the same quarter of the previous year)
- Cost of sales increased by 3.4% over the last 12 months
- Net income: $247 million (down from $380 million from for the same period of the previous year)
- Diluted earnings per share: $0.72 (down from $1.09 for the same period of the previous year)
- PE ratio of Kellogg's: 22.1
- Quarterly dividend declared: $0.57
- Dividend yield: 3.57%
- Diluted weighted-average shares outstanding: 342 million (down from 349 million for the same period of the previous year)
- Cash and cash equivalents $453 million
- Cash and cash equivalents per share: $1.32
- Cash and cash equivalents makes up 2.07% of Kellogg's market capital
- Cash and cash equivalents makes up 2.58% of Kellogg's total assets
- Accounts receivable: $1.643 billion
- Accounts receivable makes up 9.38% of Kellogg's total assets
- Inventories: $1.2 billion
- Inventories makes up 6.7% of Kellogg's total assets
- Stockholders equity in Kellogg's: $3.288 billion
- Stockholders equity per share: $9.61
- Kellogg's is trading at 6.64 times its stockholders equity which is well outside the expected range of between 2 and 4 that most firms tend to trade at.
- Cash generated from operations (for 9 months): $924 million
- Cash generated from operations per share (for 9 months): $2.71
Kellogg's management commentary on their 4th quarter 2019 results
BATTLE CREEK, Mich. - October 29, 2019 - Kellogg Company (NYSE: K) today announced third-quarter 2019 results and reaffirmed its full-year financial guidance.
"We remain squarely on strategy and on plan, and this is reflected in our third quarter results," said Steve Cahillane, Kellogg Company’s Chairman and Chief Executive Officer. "Our reshaped portfolio is doing what it is intended to do, focusing on our higher growth categories and markets. We have revitalized key brands through improved brand-building and enhanced innovation. And, as we move past our heaviest investments and costs, we are on track for delivering gradual improvement in profitability. While fully recognizing that we still have work to do, I'm very pleased with our progress."
Highlights:
• As previously announced, completed divestiture in late July, which adversely impacted reported results.
• Due to the divestiture, reported net sales declined by approximately (3)% in the quarter.
• Organic net sales growth, which excludes the impact of the divestiture and currency translation, exceeded 2% in the quarter.
• Growth momentum was sustained in snacks, frozen foods, and emerging markets.
• The Company reaffirmed its full-year 2019 guidance for net sales, operating profit, earnings per share and cash flow
Kellogg Company reaffirmed full-year financial guidance. Specifically:
• Net sales growth is still expected to be +1-2% year on year on both a currency-neutral and organic basis.
• Currency-neutral adjusted operating profit expectations continue to be for a decline in the range of (4)% to (5)%, primarily reflecting the impact of the divestiture.
• Currency-neutral adjusted EPS is expected to decline by approximately (10)% primarily reflecting the lapping of year-ago tax benefits, lower other income related to beginning-of-year pension assets, and the impact of the divestiture. This represents the favorable end of the previously communicated guidance range of (10)% to (11)% as it reflects a lower than expected tax rate in the third quarter and better than expected other income.
• Cash flow is expected to be approximately $0.5 billion for the year, primarily reflecting the impact of the divestiture.
"We remain squarely on strategy and on plan, and this is reflected in our third quarter results," said Steve Cahillane, Kellogg Company’s Chairman and Chief Executive Officer. "Our reshaped portfolio is doing what it is intended to do, focusing on our higher growth categories and markets. We have revitalized key brands through improved brand-building and enhanced innovation. And, as we move past our heaviest investments and costs, we are on track for delivering gradual improvement in profitability. While fully recognizing that we still have work to do, I'm very pleased with our progress."
Highlights:
• As previously announced, completed divestiture in late July, which adversely impacted reported results.
• Due to the divestiture, reported net sales declined by approximately (3)% in the quarter.
• Organic net sales growth, which excludes the impact of the divestiture and currency translation, exceeded 2% in the quarter.
• Growth momentum was sustained in snacks, frozen foods, and emerging markets.
• The Company reaffirmed its full-year 2019 guidance for net sales, operating profit, earnings per share and cash flow
Kellogg Company reaffirmed full-year financial guidance. Specifically:
• Net sales growth is still expected to be +1-2% year on year on both a currency-neutral and organic basis.
• Currency-neutral adjusted operating profit expectations continue to be for a decline in the range of (4)% to (5)%, primarily reflecting the impact of the divestiture.
• Currency-neutral adjusted EPS is expected to decline by approximately (10)% primarily reflecting the lapping of year-ago tax benefits, lower other income related to beginning-of-year pension assets, and the impact of the divestiture. This represents the favorable end of the previously communicated guidance range of (10)% to (11)% as it reflects a lower than expected tax rate in the third quarter and better than expected other income.
• Cash flow is expected to be approximately $0.5 billion for the year, primarily reflecting the impact of the divestiture.
Kellogg's (NYSE: K) stock price history
The image below, obtained from Google, shows the stock price history of Kellogg's over the last 5 years. And its not been a good time for Kellogg's stockholders. 5 years ago the stock was trading at around $64 a stock and its currently trading at $63.84 a stock. That's a slight loss of -0.4% suffered by Kellogg's stockholders over the last 5 years. The opportunity cost of holding Kellogg's stock instead of say Netflix that returned over 300% over a 5 year period becomes very significant.
The stock of Kellogg's is trading at a lot closer to its 52 week low of $49.03 than it is to its 52 week high of $86.31, which to us is a indication that the short term sentiment and momentum of Kellogg's stock is very negative at this point in time.
The stock of Kellogg's is trading at a lot closer to its 52 week low of $49.03 than it is to its 52 week high of $86.31, which to us is a indication that the short term sentiment and momentum of Kellogg's stock is very negative at this point in time.
Recent coverage of Kellogg's
The extract below discusses the latest news regarding Kellogg's as obtained from TheStreet.com
Shares of Kellogg (K - Get Report) were higher in the premarket Tuesday after the cereals and snacks maker reported that third-quarter net income fell 34%, while adjusted earnings beat analysts' expectations. Earnings per share at the Battle Creek, Mich., company were 72 cents a share compared with $1.09 in the year-earlier quarter. Currency-neutral adjusted earnings were $1.05 against $1.06.
Sales slipped 2.8% to $3.37 billion from $3.47 billion. A survey of analysts by FactSet was expecting earnings of 85 cents a share, or an adjusted 91 cents, on sales of $3.35 billion. The sales number reflected the late-July sale of certain cookie and snack businesses to Italy's Ferrero Group plus negative foreign-currency translations, Kellogg reported. Organic sales rose more than 2%.
"Our reshaped portfolio is doing what it is intended to do, focusing on our higher growth categories and markets," Chairman and Chief Executive Steve Cahillane said in a statement."We have revitalized key brands through improved brand-building and enhanced innovation. And as we move past our heaviest investments and costs, we are on track for delivering gradual improvement in profitability."
Read the full article here
Shares of Kellogg (K - Get Report) were higher in the premarket Tuesday after the cereals and snacks maker reported that third-quarter net income fell 34%, while adjusted earnings beat analysts' expectations. Earnings per share at the Battle Creek, Mich., company were 72 cents a share compared with $1.09 in the year-earlier quarter. Currency-neutral adjusted earnings were $1.05 against $1.06.
Sales slipped 2.8% to $3.37 billion from $3.47 billion. A survey of analysts by FactSet was expecting earnings of 85 cents a share, or an adjusted 91 cents, on sales of $3.35 billion. The sales number reflected the late-July sale of certain cookie and snack businesses to Italy's Ferrero Group plus negative foreign-currency translations, Kellogg reported. Organic sales rose more than 2%.
"Our reshaped portfolio is doing what it is intended to do, focusing on our higher growth categories and markets," Chairman and Chief Executive Steve Cahillane said in a statement."We have revitalized key brands through improved brand-building and enhanced innovation. And as we move past our heaviest investments and costs, we are on track for delivering gradual improvement in profitability."
Read the full article here
Kellogg's (NYSE: K) latest stock valuation
So what is Kellogg's stock worth based on the release of their latest earnings report? Based on Kellogg's latest earnings report and their guidance provided our valuation models provide a target (full value) price for the stock of Kellogg's at $53.80 a stock and therefore believe the stock of Kellogg's is overvalued
We usually suggest that long term and fundamental investors get in at least 10% below our target (full value) price which in this case is $53.80. Therefore we believe a good entry point into Kellogg's stock is at $48.40 or below. We expect the stock of Kellogg's to pull back from current levels to levels closer to our target price (full value price) in coming weeks and moths as we believe it is overvalued at this point in time.
We usually suggest that long term and fundamental investors get in at least 10% below our target (full value) price which in this case is $53.80. Therefore we believe a good entry point into Kellogg's stock is at $48.40 or below. We expect the stock of Kellogg's to pull back from current levels to levels closer to our target price (full value price) in coming weeks and moths as we believe it is overvalued at this point in time.
Next earnings release date for Kellogg's
It is expected that Kellogg's 4th quarter results of their 2019 fiscal year will be released in late January 2020 to early February 2020